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query

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SUDHIR & PRADEEP JI

CA FINAL+LLB + DISA

2299 Points Posted on 17 June 2010

A foreign company which has no branches or offices in India win a contract to do some dredging work awarded by a PSU in india. The foreign company assign the complete rights of the contract to an indian company. 1) Can the indian company put bills to the PSU and receive payments? OR the PSU pay the foreign company and then Indian Company gets the payment from the foreighn company? 2) If Indian company can directly recieve payments from PSU, should the PSU withhold 40% TDS considering that the original contract was awarded to a foreign company?

Replies (1)

Hitesh Kothari

Chartered Accountant M.No. - 134239

326 Points Posted on 17 June 2010

Dear Pradeep,

If PSU award a contract to foriegn company in turn which awards to Indian company. then there will be no direct relation between Indian Co and PSU. In such case payment will also be routed same way like PSU to Foreign Co to Indian Co. In such case you will also have to see provsion of DTAA wherever applicable. As per Income tax, tax will be with hold @ rate as per DTAA or section 195 whichever is favorable to assessee.

and if PSU directly awrds contract to Indian company then Indian Income tax provision will apply.

Regards

Hitesh